Ludwig Electronics Inc. has a plan to compensate its employees for certain absences. Each employee can receive five days' sick leave each year plus 10 days' vacation. The benefits carry over for two additional years, after which the provision lapses on a FIFO flow basis. Thus, the maximum accumulation is 45 days. In some cases, the company permits vacations to be taken before they are earned. Payments are made based on current compensation levels, not on the level in effect when the absence time was earned.

Instructions:
1. How much is the liability for compensated absences at December 31, 2013?
2. Prepare a summary journal entry to record compensation absence payments during the year and the accrual at the end of the year. Assume that the payroll liability account is charged for all payments made during the year for both sick and vacation leaves. The average rate of compensation for the year may be used to value the hours taken except for Employee C, who took leaves at the date of termination. The end-of-year rate should be used to establish the ending liability.

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Days Accrued Jan. 1, 2013 Days Earned Days Taken iy Rate Days Accrued Dec. 31, 2013 1, 2013 Jan. 1, 2013 Dec. 31, 2013 15 $70 74 15 15 15 76 25 June 15 Rate $64 15 Hired July 1